$3.4bn of subcontracts not audited, says watchdog

11 April 2019

More than $3.4bn worth of US Department of Energy (DOE) subcontracts have not been audited as legally required – and some are beyond the six-year time limit for the government to reclaim overpayments.

A Government Accountability Office (GAO) report into DOE contracting found that many subcontractors did not receive adequate scrutiny.

In 2016, out of an annual spend of $30bn, nearly a third was spent on subcontractors, but the GAO found more than $3.4bn in these subcontracted costs had not been properly supervised.

And the DOE has still not clarified which subcontracts should be audited and what an audit should entail.

The picture was even more complex because multiple companies, universities, and other entities can join together to bid on a contract, making it difficult to track changes in the ownership of parties to the contracts and to understand the relationships between parties, the GAO said.

The DOE and National Nuclear Security Administration (NNSA) sometimes failed to ensure that contractors audited subcontractors’ incurred costs, as required in their contracts.

“Completing audits in a timely manner is important because of a six-year statute of limitations to recover unallowable costs that could be identified through such audits,” said the GAO.

“DOE headquarters has not issued procedures or guidance that requires local offices to monitor contractors to ensure that required subcontract audits are completed in a timely manner.”

The GAO said that by requiring contracting officers to independently review subcontractor ownership information, DOE and NNSA could ensure conflicts of interest are avoided among subcontractors.

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